March 12, 2023
Silicon Valley Bank (SVB) just went belly up and America’s ruling class choreographed a taxpayer-backed bailout of wealthy depositors consisting of venture capitalists, internet start-up speculators, climate change grifters, wine makers, woke activists and media giants such as Roku.
This was done without Congressional approval. Our corporate overlords and Wall Street grifters learned during the 2008 financial meltdown that letting grubby Americans have a say in bailing out their financial shenanigans was bad for business and paid off our politicians to change the law. Unelected bureaucrats like Treasury Secretary Janet Yellin, who ordered this bail out, now call the shots.
First some background. SVB is the sixteenth largest bank and is located in northern California, where many tech start-ups originate. Banks often specialize in different areas. For example, a bank in the Midwest may specialize in loans to farmers. A Texas bank may specialize in lending to oil companies.
SVB specialized in internet start-ups. But their lending to these start-ups was limited. Most start-ups are financed by venture capitalists. This is a coalition of wealthy investors who give money to internet entrepreneurs in return for stock or a partnership in the company in the hope of reaping a bonanza if the company is successful. These internet start-ups and venture capitalists then placed their money in SVB.
Now SVB could have conservatively invested this money in liquid assets such as the money market. But instead, their avaricious executives chose to buy long-term bonds because they offer higher returns. For example, let’s say SVB purchased bonds two years ago of ten years duration that paid 2% interest. The bond would pay 2% annually and then when the time period of the bond expired, SVB is returned all the money it paid for the bond.
The problem is that the word got out that many of these internet start-ups were burning cash and producing nothing and the bank’s depositors started withdrawing their money – what is called a bank run. SVB did not have the money available to pay these depositors unless it sold the bonds it purchased. But since interest rates have spiked recently, these bonds have lost value.
For example, if SVB had a large portfolio of $100,000 10-year bonds paying 2% that it purchased two years ago, it can’t sell them for $100,000 each because the interest rates are higher (bond values decrease when interest rates rise). SVB may only receive in the area of $85,000 for each bond. This means they can’t reimburse their depositors.
The federal government only insures each depositor for $250,000. No more. That’s the law. But in America, the law only applies to the politically powerless. Only 7% of the deposits were under this threshold. The uber wealthy had much higher deposits in this bank. And now they are all getting their money back thanks to the backing of the the American taxpayer.
Large banks and Wall Street firms can speculate at will and when their investments go south, they get bailed out. But some homeowner who loses his job and can’t make his mortgage payment is heaved out onto the street by a man with a gun when his house is repossessed by the bank.
The CEO of SVB, Gregory Becker, made over $9,922,000 in 2021. And a week before SVB went belly up, he sold some SVB stock valued at $3,600,000. Large bonuses were made to executives immediately before the news leaked the bank was going belly up.
Now it should be mentioned in all fairness that the SVB stockholders and bond holders (I’ll believe this when I see it) are not going to be bailed out. But since the executives have already absconded with the cash, they are still ahead of the game.
And what will happen to these crooks. If you said “Absolutely nothing,” go to the head of the class.
This incident highlights the real reason the ruling class led by billionaires such as Facebook CEO Mark Zuckerberg and Twitter executives manipulated the 2020 election to remove Donald Trump. As president, Trump would have never allowed this outrage. But they knew the feckless Biden would.
It is time for the Republican Party to show some spine. Donald Trump, Nikki Haley and Ron DeSantis need to publicly attack this plan for what it is – another kick in the face to hard working Americans.